Rubber prices fall sharply, growers fear the worst is yet to come .

KOCHI: As downward trend in the domestic rubber prices continues with lack of sufficient demand and more supply in the market, the growers have started feeling the pinch. They fear that the prices will slide southward in the coming months, falling below cost of production, with the yield going up in the winter months of December and January and imports touching a new high.

The rubber prices are around Rs 5 below the international prices at present. According to the growers another Rs 5-10 fall from the current level of Rs 152-153 per kg will hit them badly. The growers have been clamouring for an increase in the import duty from the present rate of Rs 20 per kg.

"The production fall in June and July following leaf loss from heavy rains could be made up in the coming two months. The imports have been on the higher side this year. The tyre companies still haven't used much of their allowed facility for dutyfree imports, this year. Given such a situation, more than a hike in import duty, the growers may ask for a temporary ban on imports," said N Radhakrishnan, former president of Cochin Rubber Merchants Association.

The prices would have fallen to Rs 130 per kg if the intermittent rains had not disrupted tapping, said a rubber dealer. The political uncertainty in Thailand has led to a temporary flare-up in the futures prices. This may reflect on the spot prices as well. Any hike in the import duty will help restore the confidence of the growers. "The growers have around 45 days of active tapping left. After mid-January, the tapping may decrease," he said.

The Automotive Tyre Manufacturers Association (ATMA) maintains that the tyre companies resorted to imports as the domestic availability was severely short during the months of June and July. Much of the imports they contracted have been arriving in the succeeding months. "Along with the imports, we have been buying some quantity from the domestic market as well. The sales, particularly, in the commercial segment, have been bad. We don't expect a revival in the last quarter," ATMA director general Rajiv Budhraja said.

However, despite lower sales most of the major tyre companies have reported increase in revenue. "They have been able to do that because of the lower price of main raw material natural rubber. Their profit has been the loss of the farmers. We are still waiting for the Centre to implement the hike in import duty, for which we have given several representations," said Indian Rubber Growers Association general secretary Siby J Monippally. After steep drop in raw material prices, none of the lleading domestic tyre manufacturers rolled back the tyre prices.

"The tyre companies indulged in steep tyre price increases during year 2011-12 and the major drop in price of natural rubber to Rs 151/kg from earlier peak of Rs 240/kg has not ruffled the domestic tyre companies to reduce the tyre prices in a pro rata manner,'' pointed out SP Singh, convenor of All India Tyre Dealers's Federation.

Source : economictimes.indiatimes.com